Sunday, March 20, 2016

Seeking Alpha: This Compass Still Points To Sizable Distributions

Compass Diversified Holdings (NYSE:CODI) is an unusual investment option in many respects. You can think of it as a holding company or private equity fund trading as a public entity, but what Compass is really about is buying controlling stakes in small to mid-sized businesses with certain quality characteristics and then reaping the cash flow that those businesses produce. While the company does sell businesses from time to time, it's not an active churner of its portfolio and in some ways is maybe a little more like Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) (without the core insurance operations) than a typical private equity fund.

It has been about ten months since I've written about Compass, and the shares are down about 10% over that time (an amount almost covered by the distribution) as the company has seen some underwhelming performance in its portfolio and has put itself in a position where it is not presently covering its distribution. Management has a lot of buying power on hand, though, and I think long-term coverage of the distribution is not an issue. Investors should carefully consider the tax ramifications of owning this (it is a partnership and it distributes a K-1), but I think the shares are undervalued today and hold some appeal for their cash/income-generating qualities.

Please continue here:
This Compass Still Points To Sizable Distributions

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